11 Mistakes Canadians Make with their Mortgage
Getting a mortgage can be difficult, and not just for first time buyers. Increasingly people are struggling to find the right mortgage for them. Here are some of the most common mistakes Canadians make with their mortgages.
- Choosing the first financial institution you think of. There are so many lenders out there, and many are relatively unheard of. These may be the best ones for you, so do some digging and don’t just choose the first one you find!
- Not taking into consideration your other monthly financial commitments. After you’ve paid your mortgage for the month, you need to make sure you have enough money left to cover your other expenses, like your household bills and groceries.
- Not maximising your credit score. An easy way to improve your chances of being approved is by making sure your credit score is a good as it can be. Improve your credit score by ensuring you pay off your credit card on time and in full every month. As the Chris Allard Mortgage Team say, a mistake in your credit score may cause you to be rejected for a mortgage. Make sure your credit history lines up with your actual outgoings to put yourself in the best position to be accepted for a mortgage.
- Not factoring in closing costs. Closing costs can rack up. These usually include paying your lawyer to sort the legal side of things, moving costs, house inspection costs, and home insurance. Make sure you have enough left over to cover these without scraping the bottom of the barrel.
- Not educating yourself on the different types of mortgages. There are several different types of mortgages on the market. Some of the most common are fixed rate mortgages and variable rate mortgages. Work out how much risk you can afford to take to determine which is the best fit for you. There is no one-size-fits-all answer to which you should go for, it totally depends on your own unique situation.
- Not putting interest rates in a proper context. Interest rates will go up and down, that’s just how these things work. But once you’re locked into a mortgage, unless you’ve chosen a fixed rate mortgage, there’s not an awful lot you can do about the interest rate. Make sure you work out if you can still afford to go with a lower interest rate mortgage if it goes up next year, or in the next 5 years. Fundamentally, leave yourself some money just in case you need it.
- Putting down too small of a deposit. If you don’t spend the time saving properly for your deposit, you’re going to end up needing a bigger mortgage. To maximise your chances of having your application accepted, try and minimise the amount of money you are asking to borrow. Not only will this increase your chances of being accepted, but it will also save you money in the long run, as you will have less to pay back. Remember, everything you borrow you pay interest on; the more you borrow the more interest you will pay.
- Not getting your finances sorted before you look to get approved. Several things will harm your chances of being approved for a mortgage, such as having large amounts of debt. That doesn’t mean you won’t ever get approved though! As the website Canadian Mortgage Pro says, there are steps you can take now to give yourself the best chance of being approved in the future.
- Not gathering all the right documents together. Another super simple way to help the mortgage process go smoothly is to make sure you arm yourself with all the documentation a lender might ask to see. This will streamline the process and help you to seem competent and reliable, which is always good for lenders to see!
- Not reading your mortgage documentation properly. Don’t get caught out by the fine print! Read any documentation a potential lender gives you carefully before you sign anything to ensure you are not signing up to something unexpected! This, of course, applies to any legal document. A mortgage is a huge commitment, and you don’t want to be caught out by something you skimmed over in your excitement at the prospect of a new home.
- Not using an online mortgage calculator. This one is very simple - take the hard work out of figuring out how much you might be approved for by using a handy online calculator. These tools, such as those found at MortgageCalculator.org are so useful for working out what the most cost-effective way to purchase your new house is. There are lots of different options to choose from, for example, you can change the amount of deposit you want to put down and see how that will affect your monthly payments. This equips you with the information you need to make the best decision you can.
Now you know the 11 most common mistakes Canadians make with their mortgages, you can feel more confident about getting yours the right way.